Music2go Players Manual

i
Contents
Introduction and Overview 3

What Is music2go? ....................................................................................... 3
Learning Objectives .............................................................................. 3
music2go WebSim ................................................................................ 4
Getting Started .................................................................................... 4
Net Marketing Contribution: Performance Measurement of Music2go ............ 5
Company Overview....................................................................................... 5
History ................................................................................................ 5
Organizational Structure ........................................................................ 5
Managing Your Firm ...................................................................................... 6
Testing My Decisions..................................................................................... 7
Planning 8
What Is Planning?......................................................................................... 8
Three Levels of Planning .............................................................................. 11
Strategic Company Planning ................................................................. 11
Strategic Marketing Planning ................................................................ 12
Annual Marketing Planning ................................................................... 14
Market Overview 16
The m2g Consumer Market WebSim.............................................................. 16
Consumer Demographics ..................................................................... 16
Segmentation WebSim ................................................................................ 18
Youth Segment................................................................................... 19
Sport Segment ................................................................................... 20
Standard Segment .............................................................................. 20
Forecast Segment Demand .................................................................. 21
Distribution Overview.................................................................................. 22
Consumer Electronics Stores ................................................................ 22
Department Stores ............................................................................. 24
Discount Stores .................................................................................. 25
Product Segments and Promotion ................................................................. 26
Product lifecyle and Promotion...................................................................... 27
Media Selection .......................................................................................... 29
Radio ................................................................................................ 29
Magazines ......................................................................................... 32
Newspapers ....................................................................................... 36
Television .......................................................................................... 39
Sales Promotion Activities ............................................................................ 41
Implementation 45
Decision Screen Overview............................................................................ 45
Product Development .................................................................................. 45
Existing Product Screen ....................................................................... 46
ii Contents
Empty Product Slot Screen................................................................... 47

Price......................................................................................................... 48
Product Pricing Screen......................................................................... 48
Advertising ................................................................................................ 49
Advertising Strategy Screen ................................................................. 49
Product Advertising Media Allocation Screen ........................................... 50
Product Advertising Media Subcategory Screen ....................................... 50
Sales Promotion ......................................................................................... 50
Sales Promotion Strategy Screen .......................................................... 51
Sales Promotion Allocation Screen......................................................... 51
Sales Force Management ............................................................................. 51
Sales Force Management Screen ........................................................... 52
Inventory Management ............................................................................... 52
Inventory Management Screen ............................................................. 52
Evaluation 54
Evaluation Overview ................................................................................... 54
Major Reports Available ....................................................................... 55
Industry Overview ...................................................................................... 55
Industry Benchmark Report.................................................................. 56
The Year Ahead.......................................................................................... 58
Forecast Marketing Expenditure Budget ................................................. 58
Firm Results .............................................................................................. 59
Net Marketing Contribution Report ........................................................ 60
Market Research Reports ............................................................................. 61
Market Research Report Screen ............................................................ 61
Market Research Reports Available ........................................................ 61
Product Management Reports....................................................................... 62
Product Contribution Report ................................................................. 63
Distribution Reports .................................................................................... 64
Product Channel Distribution Table ........................................................ 64
Forecast Results ......................................................................................... 65
Index 67
3
CHAPTER 1
Introduction and Overview
IN THIS CHAPTER
What Is music2go? ................................................... 3
Company Overview................................................... 5
Managing Your Firm.................................................. 6
Testing My Decisions................................................. 7
What Is music2go?
Music2go (m2g) is a computer-based marketing simulation. It can be used as an
interactive tool to enhance the integration and learning of the basic concepts of
marketing in a simulated portable music player (PMP) industry (i.e. mp3 players).
Music2go will give you the opportunity to have practical hands on experience at
making critical marketing decisions and seeing the outcome in a live, interactive
case study.
Learning Objectives
By interacting in this simulated marketing environment you will learn:
The standard terms and concepts of the marketing mix; product, price,
promotion and place (distribution).
To think of marketing planning as planning the integration of these components
in an integrated marketing communication (IMC).
To develop both a strategic marketing plan and annual marketing plans for an
organization
To analyze market research data to support the planning process
To evaluate marketing performance using marketing cost analysis.
Many key quantitative skills for marketing management.
Music2go is designed for use in many different ways and at different levels within
universities and corporations. simulate the marketing decisions of a company in
the portable music player (PMP) industry and require you to make comprehensive
decisions about the marketing mix of product, price, promotion and place.
music2go WebSim
In the Multi-Player WebSim version, you will compete against other student teams
within a 4 to 7 Firm Industry competing for the highest CNMC (Cumulative Net
Marketing Contribution).
The WebSim requires an Internet connection to be open before logging in. Your
decisions are updated immediately and saved on our servers. This allows you to
4 music2go Player's Manual
login to make decisions for your firm from anywhere where you have a
computer with access to the Internet.
All members can login to view their Firm, results, reports, and make decisions
at any time. However we recommend that you select one team member to
enter your final decisions to avoid confusion.
Moving from one year (decision period) to the next is done by automatic
rollover on preset dates set by your Instructor. Before each of these scheduled
times your team needs to have all decisions for the upcoming year entered into
the Multi-Player version. At the decision deadline time the simulation will be
processed (rollover) and the decisions you have saved at that point will be
automatically processed.
Getting Started
1 Go to the Smartsims website, www.smartsims.com, and login at the top right
using the login details provided to you by your Instructor. This will take you
through to your Course Page. If you do not know these details you can request
them through our website.
2 If your course requires you to make payment for use of the simulation you will
be prompted to click on "I need to register" link”. Follow the on-screen
instructions to register and make payment (credit card or check). If payment
has been made by your Institution you will be taken directly to your Course
Page.
3 We recommend that you view the screenshot presentation available to you on
your Course Page for more on the basics of navigating the game, making
decisions, and processing decisions.
4 You will be emailed by Smartsims with your multi-player login details. Once you
have received these, go to www.smartsims.com and login again using these
new details.
5 Once logged in, you can launch the Multi-Player game. Simply click on the
"WebSim" menu item on the left hand side of your coursepage, and then click
the "Launch FirmX" button to begin the browser based simulation.
6 Once logged in, you will see that if you click your way through the menu tree
items on the left-hand side, you can see the various reports and decision areas
available to you so work your way down. You will note that some menu tree
items can be expanded by clicking the (+) symbol. When viewing the report
menus, click on the drop-down menu at the top of your screen will allow you to
view further reports.
7 When you enter a decision, ensure that you click the "Apply" button so that the
decision is stored on our servers for processing.
Net Marketing Contribution: Performance Measurement

of Music2go
Net marketing contribution is the amount of profit remaining after manufacturing
(cost of goods sold) and marketing expenditures have been deducted. The only
costs still to be deducted are other functional overhead costs for your firm, e.g.
finance, administration etc.
Net marketing contribution is a measure of how profitable your firm is as a result of

your strategic marketing plan. There are two ways that you can increase your net
marketing contribution:
Increase Gross Margin without increasing your marketing expenditure

Reduce Marketing Expenditure without reducing your Gross Margin.
Chapter 1 Introduction and Overview 5
How you achieve that is the challenge of m2g.
Company Overview
The section below gives you an overview about the history of your m2g firm; it's
organizational structure and how your performance will be measured now that you
have been appointed Vice President Marketing.
History
Your m2g firm is the portable music player (PMP) division of a larger audio
equipment corporation. Traditionally your corporation has been very strong in the
household audio market and five years ago, your division was created to launch an
assault on the portable music player market. However, after strong initial growth
your m2g firm has been losing sales growth momentum over the last two years.
After another disappointing year end result of failing to meet sales forecasts you
have been appointed Vice President Marketing to lead the management team
directing sales, marketing and distribution for the portable music player (PMP)
market.
Your challenge is to take your existing starting position and to build your m2g firm
into the dominant player in the PMP market as quickly as possible.
Organizational Structure
Before beginning to plan how to run your m2g firm you need to understand how it
is organized.
There are several decision areas in m2g that you will need to become familiar with:
Product Development - whether to upgrade existing products and/or launch

new ones.
Price - what price to charge for each of your products and which retail channels
to distribute it through.
Advertising - which media to place advertisements with for each product.
Sales Promotion - what sales promotion activities to run for each product.
Sales Force Management - what size sales force to have for each retail channel.
Inventory Management - how much stock to keep in hand of each product.
In m2g, you will be competing directly against several teams from your class
(typically four other teams). Each team will start in exactly the same position as
you with exactly the same type of firm, products and results. Your course
instructor will explain what the goals of the simulation are to you but typically, you
can expect to be required to try and maximize cumulative net marketing
contribution within a limited number of decisions.
The combined actions of all of the firms in the market affect the performance of the
whole industry. For example, if everybody discounts price then more consumers
will buy PMPs, and vice versa.
ORGANIZATIONAL STRUCTURE
How you organize your team, is generally left up to you to decide unless your
course instructor has a preferred structure that he/she requires you to follow. In
general, there are two broad possible approaches to managing your m2g firm:
Functional Manager approach each member of the team takes individual

responsibility for a particular functional decision area, e.g. Product Development
Manager, Advertising Manager, Sales Promotion Manager, Sales Manager (Pricing
and Sales Force Management), Inventory Manager, General Manager. The
advantages of this structure can be that everyone is required to become a specialist
in their own area and to make recommended decisions for their function. The
disadvantage is that some areas are more exciting than other, e.g. pricing is often
more exciting than inventory control. You also have a limited budget so you need to
agree on a budget meeting to allocate maximum budgets to each functional area.
Product Manager approach - you start making decisions as a group but as each new
product is launched (you are allowed a maximum of 6), you appoint someone to be
product manager and to make recommendations for all aspects of marketing that
product. The remaining members take the role of general manager, allocating
budgets and monitoring the performance of the whole firm. The advantages are
that the product managers get to try to control all functional aspects of marketing a
product and the disadvantages are that some products will be more successful than
others. This could generate friction within your team and it will take several
decision periods to launch enough products for everyone to have one.
Managing Your Firm

The management process, as applied to marketing, consists of:
Planning a marketing program,

Implementing it,
Evaluating its performance.
This process is depicted in the figure below
Figure 3: The management process in marketing
The planning stage includes setting goals and designing both strategies and tactics
to reach these goals. The implementation stage entails designing and staffing the
marketing organization and then directing the actual operation of the organization
according to the plan. The evaluation stage consists of analyzing past performance
in relation to organizational goals. This third stage indicates the interrelated,
ongoing nature of the management process. That is, the results of this stage are
used in planning goals and strategies for future periods. So the cycle continues.
Chapter 1 Introduction and Overview 7
The rest of this manual will concentrate on taking you through the three steps of
the management process in more detail.
Testing My Decisions
FORECASTING
In a typical M2g year you will review your previous year's performance by reading
the Industry Overview Reports and Firm results reports, and formulate a set of
decisions based on this data. You will then enter your decisions in each screen and
review your Forecast Results reports. If you are not satisfied with your forecast
results then you repeat the process of planning your decision set and forecasting
sales.
We recommend that you focus on accurate forecasting. There are numerous reports
available to aid in forecasting and to compare your actual performance to your
previous forecasts.
8
CHAPTER 2
Planning
IN THIS CHAPTER
What Is Planning?..................................................... 8
Three Levels of Planning............................................ 11
What Is Planning?
At the strategic planning level in m2g, you need to match your m2g firm's
resources with its market opportunities over the long run. A long-run perspective
does not mean that plans can be developed or executed in a sluggish manner. The
term strategic window describes the limited amount of time in which a firm's
resources coincide with a particular market opportunity. Typically, the "window" is
open only for a relatively short period. Thus in m2g, your firm must be able to
move rapidly and decisively when a strategic window opens.
MISSION
An organization's mission states what customers it serves, what needs it satisfies,
and what types of products it offers. A mission statement indicates, in general
terms, the boundaries for an organization's activities.
To be useful, a mission statement cannot be either too broad and vague or too
narrow and specific. To say that a firm's mission is "to benefit American consumers"
is vague; to state that its purpose is "to make tennis balls" is overly narrow.
Neither statement outlines meaningful benefits for customers or provides much
guidance to management. Unless the firm's purpose is clear to executives, strategic
planning is likely to result in disagreement and confusion.
For example if your m2g firm decides to target the Youth segment, then in product-
orientated terms you mission would be "we make portable music players for the
youth market". A more marketing orientated approach would be "to create
affordable fashionable portable music players so today's youth can listen to music
on the go". However, you need to remember that if you use a word like
"affordable" then that means that your customers should not expect your products
to be the most expensive in the market.
OBJECTIVES AND GOALS

An objective or goal is simply a desired outcome. Effective planning must begin
with a set of objectives that are to be achieved by carrying out plans. To be
worthwhile and workable, objectives should be:
Clear and specific.

Stated in writing.
Ambitious, but realistic.
Consistent with one another.
Chapter 2 Planning 9
Quantitatively measurable when possible.

Tied to a particular time period.
For example, for your m2g firm:
Weak (too general) Workable

Increase our market share Increase our market share to
45% from its present 40% level
Increase our net marketing Increase our net marketing
contribution contribution to 20% from its
present 15% level
STRATEGIES
The term strategy was originally associated with military operations. In business, a
strategy is a broad plan of action by which an organization intends to reach its
objectives and, in turn, to fulfill its mission. In m2g, the relationship between
objectives and strategies may be illustrated as follows:
Objective Possible Strategies

Increase our market share to 1. Enter into a new market segment
45% from its present 40%
level 2. Increase marketing support for our
products
In m2g, you will often find that your competitors have similar objectives to your
firm, e.g. increase market share by 10% over the next 3 years. Some competitors
will choose identical strategies to you while others will choose contrasting
strategies. If every firm makes exactly the same decisions then you will all do
equally well, and the key to strategy in m2g is trying to decide, given the strategies
my competitors are employing, what is the best strategy for my firm to follow to
achieve our objectives?
TACTICS
A tactic is a means by which a strategy is implemented. A tactic is a more specific,
detailed course of action than a strategy. In m2g, a tactic is the decision that you
intend to make this year (decision period) to implement your current strategy. For
example:
Strategy Tactics
Enter into a new Launch a new product
market segment
Fund a promotional campaign targeting consumers in that
segment
Increase your sales force in the retail channels favored by
this segment to increase your distribution coverage
To be effective, a tactic must coincide with and support the strategy with which it is
related. You will experience difficulties making decisions in m2g if you find that to
achieve the objectives that you have put forward you need to have opposing
strategies and tactics. For example if you are trying to simultaneously increase
market share and increase your net marketing contribution, then it will be a difficult
balancing act between funding increased marketing budgets while growing sales
quickly enough to still allow your net marketing contribution to grow.
SUMMARY - KEY PLANNING QUESTIONS

The concepts of mission, objectives, strategies, and tactics raise important
questions that must be answered by an organization seeking success in business
or, more specifically, in marketing. These questions can be summarized as follows:
Concept Question
Mission What business are we in?
Objectives What do we want to accomplish?
Strategies In general terms, how are we going to
get the job done?
Tactics In specific terms, how are we going to
get the job done?
Three Levels of Planning

Planning may cover long or short periods. Strategic planning is usually long range,
spanning, five or even more years and deals with company-wide issues such as
expanding or contracting production, markets, and product lines. Short-range
planning typically covers one year or less and is the responsibility of middle- and
lower-level managers.
Planning your m2g firm's marketing strategies should be conducted on three

different levels as shown in the figure below:
Figure 4: Three levels organization planning
In m2g, you are required to create your firm's strategic company plan. Normally a
company would then be required to create second tier plans for each of the
functional areas, e.g. Finance, Operations etc. However you are only responsible
for the marketing performance of your firm so you will only be required to create
the Strategic Marketing Plan and an Annual Marketing plan for each year (decision
period) of the simulation.
Strategic Company Planning

Strategic company planning consists of four essential steps:
Define the organizational mission.

Analyze the situation.
Set organizational objectives.
Select strategies to achieve these objectives.
The first step, defining the organizational mission, influences subsequent planning.
As described earlier you need to write a mission for your m2g firm that states what
customers you will serve, what need you satisfy, and what types of products you
will offer.
Conducting a situation analysis, the second step, is vital because strategic planning
is influenced by many factors beyond and within an organization. A situation
analysis consists of gathering and studying information pertaining to one or more
specified aspects of an organization. In m2g, you only have direct control of the
marketing function, so we will describe how to approach the situation analysis in
more detail under the strategic marketing planning section below.
The third step in strategic company planning, deciding on a set of objectives,

guides the organization in fulfilling its mission. Objectives also provide standards for
evaluating performance. In m2g, your key objectives will be set by the marking
criteria for this assessment activity in your course. You will need to supplement
these key objectives with other supporting objectives that will help you to achieve
your goals.
By this point in your strategic planning process, you will have determined where
your m2g firm wants to go. The fourth step, selecting appropriate strategies,
indicates how your firm is going to get there. Organizational strategies represent
broad plans of action by which an organization intends to fulfill its mission and
achieve its goals.
Strategic Marketing Planning

After planning for your m2g firm as a whole, you now need to lay plans for
marketing the functional area that you are directly responsible for. Of course, the
firm level mission and objectives that you wrote above will guide your strategic
marketing plan.
Strategic marketing planning is a five-step process:
Conduct a situation analysis.

Develop marketing objectives.
Determine positioning and differential advantage.
Select target markets and measure market demand.
Design a strategic marketing mix.
Each step is discussed below.
SITUATION ANALYSIS
The first step in strategic marketing planning, situation analysis, involves analyzing
where your m2g firm's marketing program has been, how it has been doing, and
what it is likely to face in the years ahead. Doing this will enable you to determine if
it is necessary to revise the old plans or devise new ones to achieve your firm's
objectives.
Situation analysis normally covers external environmental forces and internal non-
marketing resources. A situation analysis also considers the groups of consumers
served by the company, the strategies used to satisfy them, and key measures of
marketing performance. Due attention should be given to identifying and assessing
competitors that are serving the same markets. In addition, as often stressed by
consultants, it's important to "get out of the box"-that is, to develop new
perspectives on the organization's core activities and to question assumptions
about how it does business (assumptions such as "we must offer competitive
prices"). Situation analysis is critical, but it can be costly, time-consuming, and
frustrating.
The Market Overview chapter in this manual will provide you with information
giving you a broad overview of the m2g market place. You also have information
available in reports in the simulation itself and the opportunity to purchase market
research about key areas of competitive intelligence, e.g. sales figures for
competitors.
As part of a situation analysis, many organizations perform a SWOT assessment. In

this activity, a firm identifies and evaluates its most significant strengths,
weaknesses, opportunities, and threats. To fulfill its mission, an organization needs
to capitalize on its key strengths, overcome or alleviate its major weaknesses,
avoid significant threats, and take advantage of promising opportunities.
As each year passes in m2g you will need to review both your strategic marketing
plan and your situations analysis, it is important to understand that this is not a
static document. Your experiences during the simulation will shape and change
your assumptions and perspectives about your firm and the m2g market place.
This will lead to new opportunities and strategic windows opening for you as long as
you are still looking for them.
MARKETING OBJECTIVES
The next step in strategic marketing planning is for you to determine your
marketing objectives. Marketing objectives should be closely related to your m2g
firm's company-wide objectives and strategies.
You already know that strategic planning involves matching an organization's

resources with its market opportunities. With this in mind, each marketing objective
should be assigned a priority based on its urgency and its potential impact on this
area and, in turn, your m2g firm. Then resources should be allocated in line with
these priorities.
POSITIONING AND DIFFERENTIAL ADVANTAGE

The third step in strategic marketing planning actually involves two complementary
decisions: how to position a product in the marketplace and how to distinguish it
from competitors. Positioning refers to a product's image in relation to competing
products as well as other products marketed by the same company.
After the product is positioned, a viable differential advantage has to be identified.

Differential advantage refers to any feature of an organization or brand perceived
by customers to be desirable and different from those of the competition. In m2g,
you must give each of your products a brand name and each product will have a
rating in terms of style and technological features. Each market segment has
different preferences in terms of both style and technology appreciation.
Besides striving for an advantage, you must also avoid a differential disadvantage
for your product. For example in m2g, the worst positioning a product can have is
to be the highest priced, lowest product awareness, least distributed and worst
designed product in the market.
TARGET MARKETS AND MARKET DEMAND

Selecting target markets is the fourth step in marketing planning. A target market
refers to a group of people or organizations at which a firm directs a marketing
program. In m2g, to choose one or more target markets, you must forecast
demand (that is, sales) in market segments that appear promising. The results of
demand forecasting will represent valuable information in deciding whether a
specific segment is worth pursuing, or whether alternative segments need to be
considered. More information on the possible market segments available to you in
m2g is provided in the Market Overview chapter of this manual.
MARKETING MIX
For each target market, you must design a marketing mix, which is the combination
of multiple aspects of the following four elements: a product, how it is distributed
and promoted, and its price. These four elements, are intended to please the
target market(s) and, equally important, achieve your m2g firm's marketing
objectives.
Each marketing-mix element contains numerous options. Further, decisions

regarding one element affect the others. In marketing, you need to consider these
options and relationships when designing a marketing-mix for a particular target
market.
Annual Marketing Planning

Besides strategic planning for several years into the future, more specific, shorter-
term planning is also vital. An annual marketing plan will provide your m2g firm
with a blueprint for a year's marketing activity.
PURPOSES AND RESPONSIBILITIES

An annual marketing plan serves several purposes:
It summarizes the marketing strategies and tactics that will be used to achieve
specified objectives in the upcoming year. Thus it becomes the "how-to-do-it"
guide for executives and other employees involved in marketing.
The plan also points to what needs to be done with respect to the other steps in
the management process - implementation and evaluation of the marketing
program.
Moreover, the plan outlines who is responsible for which activities, when they
are to be carried out, and how much time and money can be spent.
ANNUAL MARKETING PLANNING IN M2G

Each year before making your decisions in m2g, you should go through the
following series of steps to create a draft annual marketing plan.
Executive Summary. You should be able to write a short explanation of what

the main thrust of your marketing plan is this year.
Situation Analysis. You should examine the marketing program for each of
your products within the context of pertinent past, present, and future
conditions. Much of this information might be derived from the results of your
earlier strategic marketing planning.
Objectives. Specific annual objectives that support the longer term objectives
of your strategic marketing plan. E.g. an annual objective to increase sales by
5% this year will support a strategic objective to increase sales by 25% in 5

years.
Strategies. As in strategic marketing planning, the strategies in an annual plan
should indicate which target markets are going to be satisfied through a
combination of product, price, distribution and promotion.
Tactics. Specific activities devised for carrying out each major strategy detailed
above. Tactics specifically answer the questions of what, who and how for your
firm's marketing efforts. In m2g, this is effectively the actual decision set that
you enter in the simulation. E.g. A strategy might be to improve the design of
one of your products, the tactic will be actually choosing the new design in the
simulation and implementing it.
Financial Schedule. This section normally includes two kinds of financial
information: projected sales, expenses, and profits in what's called a pro forma
financial statement; and the amounts of resources dedicated to different
activities in one or more budgets. In m2g, you are given a budget that you
divide amongst your various marketing mix activities and the pro-forma
financial statements are prepared automatically for you as a result of the
decisions that you enter.
Timetable. Normally you would include a timetable of when various activities
are due to happen, but in m2g the decision period is a year so that is not
required.
Evaluation Procedures. This section addresses the questions of what, who, how
and when connected with measuring performance against goals, both during
and at the end of the year. In m2g you make annual decisions, but it is still
important to determine in advance how you will evaluate the success or failure
of your plan. To give you some assistance with this each m2g provides you
with a comparison of your actual results versus your forecast results.
16
CHAPTER 3
Market Overview
IN THIS CHAPTER
The m2g Consumer Market WebSim ........................... 16
Segmentation WebSim .............................................. 18
Distribution Overview................................................ 22
Product Segments and Promotion ............................... 26
Product lifecyle and Promotion ................................... 27
Media Selection ........................................................ 29
Sales Promotion Activities.......................................... 41
The m2g Consumer Market

WebSim
In m2g Multi-Player there is a total population of approximately 100 million
households representing a market the size of America. m2g starts with
approximately 10-15% of households purchasing at least one PMP each year with
the potential through marketing to grow to up to 40% of households within 10
years.
Consumer Demographics
Market research has shown that there are three key factors involved in determining
the likelihood of a household purchasing a PMP in m2g.
Age, the younger a person is the more likely they are to want a PMP, provided
they are older than ten years old. Market research has shown that very few
PMP users are aged over 35 years old in m2g.
Income, market research has shown households earning an annual income less
than $20K do not buy significant numbers of PMPs in m2g.
Household type, large numbers of PMPs are purchased for dependents by
Households with children.
Therefore to better understand how to segment the m2g market you should review
age, income and household type information.
HOUSEHOLD AGE AND INCOME

In the m2g market, there are five main household age groups:
Youth (15-24)
Young Adults (25-34)
Middle Aged (35-44)
Senior (45-64)
Elderly (65+)
Chapter 3 Market Overview 17
The proportion earning more that $20K and their split between the various age
groups are shown in the figures below.
Figure 5:Household Age and Income Data
HOUSEHOLD TYPE
In the m2g market there are three main household types:
Non-family
Family with children
Family without children
From this information, you can see that:
Youth household make up a very small percentage of the population so most

youth must still be living with their parents. However youth households without
children should be the ideal candidates for multiple PMP purchases.
Young adult households will be the highest earning of the household purchasing
directly for their own use rather than their children. So childless young adult
households will be prime targets for PMP promotion.
Middle-aged and senior households are the largest proportion of households
with older children; any PMP products pitched to teenagers will need to target
distribution channels where these households shop.
Elderly households are generally childless or non-family. Given that most m2g
consumers are believed to be less than 35 this household type can be ruled out as
a major demographic segment in m2g.
Segmentation WebSim
Further market research has identified that there are three potential market
segments available in m2g.
Youth
Sports
Standard
Youth Segment
The Youth segment is representative of the high style emphasis, fashion conscious
youth purchaser (less than 18 years of age) of PMPs in the m2g market. Products in
this segment tend to display the following characteristics:
Competitively priced ($30 - $60)

High emphasis on style features. This includes product attributes such as shape
and coloring as well as storage accessories such as player/CD cases.
An average level of technological features relative to other segments. While
youth portable music players do not typically include extra features such as FM
radio or blue tooth accessories, sound options are important to the youth
segment. This includes volume control as well as bass boost/surround sound
and stereo headphones, reflecting the types of music that this segment prefers
to listen to (R&B, Rock, Dance etc).
Fashion driven, with moderately fast changes in tastes and preferences. Note
that the youth segment will grow to be an increasingly significant segment
several years into m2g as market research and product launch begins to reveal
the opportunity to leverage existing technologies towards a younger target
audience.
Purchase decision is heavily influenced by Television and Radio.
Older age groups on behalf of children/youths will make the majority of
purchases in this segment. As such purchasers in this segment tend to reflect
the demographic composition of family households with children in the United
States market. They also tend to be more price conscious owing to the fact that
portable music players are a luxury item, and many pre-commitments exist in
family households with children (this translates to lower average disposable
income per person than in non-family households).
Figure 6:Youth Segment- purchase profile by household type
Sport Segment
The sports segment is comprised of young, physically active individuals. They
require a high degree of technological sophistication in their portable music players
in order to cope with the physical demands they place on their PMP when in use
with sports/recreation activities. As such, these players can command a premium
price in the market, and are thus popular with young adults (18-34) who have
begun work but are not yet subject to the family commitments of older age
groupings. Products in this segment tend to display the following characteristics:
High priced ($80-$120)

High emphasis on technological features. Of critical importance is the
installation of advanced anti- shock technology as well as improved battery life
(active people do not want to stop to charge batteries when "on the go"). .
Medium high emphasis on styling features. In order to be used in conjunction

with exercise a portable music player must be durable, water resistant light and
compact. It must also encompass features such as belt clips and/or arm straps,
since carrying a Portable Headset Audio (PMP) player is not practical in exercise
situations.
This segment will emerge from the standard segment (see below) as technological
developments begin to facilitate the service of the above set of tastes and
preferences. Although the smallest market by potential sales volume, products in
this segment will command a high price relative to Youth and Standard PMP
markets.
Figure 7: Sports segment- purchase profile by household type
Standard Segment
This is the base segment of market demand and is representative of the original
state of portable music player technology at the beginning of this simulation. While
still appealing to the younger adult and youth age groupings (i.e. those less than
35) through their rapid adoption of digital audio technology, consumers in this
segment tend to be less active than those in the sports segment and thus do not
require the high level technological specifications inherent in sports designs. Thus
while young adults in this segment share the purchasing ability of their sports
counterparts they are slightly more price conscious, which is reflected in the
relative pricing between these two segments. Products in this segment tend to
display the following attributes:
Medium priced ($40-$80)

Average level of technological specifications. While standard buyers do not
require the high level technologies of the sports segment, they display the
highest interest in external accessories. These include car adaptor units as well
as AC adaptors for home/long term travel usage. In contrast to the youth
segment, consumers have less interest in functions for specific music types
(such as Bass Boost) but are instead more interested in systems for organizing
different songs/music such as repeat, random and programmable memory
options as well as the ability to receive FM radio and radio station presets .
Average level of style features. Since portable music players are more heavily
used for activities such as travel and commuting size/weight/durability and
aesthetics, become less important considerations for the average consumer in
this segment.
The standard segment will form the basis for market demand in the first 2-3 years
of the simulation. Market research (if purchased) will indicate the emergence of the
higher tech/med high style sports segment as anti shock and motion sensor
technology develops. In addition, a new style conscious youth segment will be
evident as the ability to position existing (and new) product specifications is
explored in the opening years of the m2g PMP industry.
Figure 8: Standard segment- purchase profile by household type
Forecast Segment Demand

The following market research data shows information relative to forecast trends in
underlying segment demand. The forecast is that the standard segment has
matured and most of the growth is expected to come from the new emerging
segments. However, bear in mind that these are only forecasts and the true
demand will vary according to the combined actions of firms in the industry. For
example, if all firms discount price heavily and launch major promotional campaigns
then all of the market segments could grow significantly.
Figure 10: m2g Multi-Player Forecast Demand 2008-2018

Distribution Overview
Consumers in the PMP market can choose to purchase at one of three categories of
retailer- consumer electronics, department stores or discount stores. The proportion
of consumers purchasing from each retailer (by market segment) is given in Table
1 below:
Table 1:Retail Purchases by Segment Type
Market Segment
Retail Channel Youth Sport Standard
Consumer Electronics 60% 50% 40%
Department Stores 30% 30% 30%
Discount Stores 10% 20% 30%
Note: "Consumer' is defined here as the individual conducting the purchase

transaction, as distinct from the end-user of the product. This is an important
distinction with regard to the youth segment (see below).
Consumer Electronics Stores

The Consumer electronics store channel is comprised of a mixture of traditional
limited line (electronics store) shops and new emergent 'Category-Killer' stores.
Both share some common aspects in terms of marketing strategy, but differ along
several aspects of the product mix. These similarities and differences are
highlighted in table 2 below:
Table 2: CE Store Categories by Marketing Mix
Aspect of the Marketing Mix Limited Line Store Category Killer Store
Product Offering Narrow, but deep Narrow, but deep range
range of product lines of product lines
Pricing Full pricing Low pricing
Customer Services Full customer Few to moderate
services customer services
Other distinguishing Typically synonymous Primary object to secure
characteristics with primary product high volume/large
line (electronics proportion of sales in a
store) particular product
category - hence
'category killer'
Examples Local electronics Best Buy
store
Taken in aggregate these two store types account for approximately 50% of all
sales of portable music players (PMP) players in the m2g market. This reflects the
fact that a high proportion of consumers from each product segment choose to
shop at consumer electronics stores. This can be motivated through purchase
behavior and preferences of each of these potential target markets, as summarized
below:
YOUTH SEGMENT
Consumer electronics stores are an extremely popular place of purchase for
consumers in the youth market, accounting for 60% of all sales (by volume) in this
target market. This popularity can be attributed to the combination of the following
factors:
Deep product assortment within the portable music player product line is
consistent with the emphasis that youth places on styling:
By stocking a wide variety of models, CE retailers are able to cater to the wide
variety of styling preferences (colors, pattern, shapes and other aesthetics)
within the youth segment.
By aiming at achieving a high rate of sales turnover, Category killer stores are
able to more quickly adapt to fashion-driven changes in tastes and preferences.
Between them, traditional limited-line and category-killer stores serve the
needs of the middle-aged buyer with regard to making a purchase decision. In
the case of the traditional Limited-Line store, this is provided in the form of
extensive customer service in order to choose the 'best' gift for a younger
family member, while the low pricing in category killer stores reflects the price
consciousness of these buyers in this segment.
SPORTS SEGMENT (ONLY AVAILABLE IN MULTI-PLAYER)

Consumer electronics stores are almost as popular with consumers in the sports
segment, accounting for half of all purchases in this market by sales volume. The
reasons for this popularity can be attributed to the combination of the following
factors:
The deep product assortment is consistent with the emphasis that sports
consumers place on the combination of styling and technological features. By
stocking a wide variety of models encompassing a range of features, CE stores
are able to capture a large proportion of demand in this segment.
Sports consumers are prepared to pay full prices at traditional limited line
electronics stores in return for additional customer services such as advice on
features and after sales service (e.g. warranties and repairs). This is related to
the fact that portable music players in this market will receive the most
intensive/demanding usage as part of recreational activities.
The high sales turnover rates of category killer stores are useful to counteract
the effects of product obsolescence associated with technological developments.
STANDARD SEGMENT
Many purchasers in the standard segment also use CE stores, although they do not
constitute the majority of sales by place of purchase (CE comprise 40% of
purchases in this segment). The reduced popularity of CE stores relative to the
sports and youth segments can be motivated as follows:
Buyers in the standard segment place less emphasis on styling and

technological features of portable music players than the other two market
segments. As such, the deep product range within the PMP product line is of
reduced importance with regard to variations in consumers tastes and
preferences.
This effect is set against the fact that many consumers in the standard segment
are looking for accessories suitable to convert portable music players for use at
home/work or in the car. As such purchasers are prepared to pay full prices in
order to receive customer service and choice (offered by electronics stores)
regarding the selection of combinations of player units/accessories that are best
suited to their requirements.
Consumers in this segment typically spend less time on the identification and
evaluation of alternative products than the sports or youth related consumer .
Consequently, an average purchaser in this segment is less inclined to
specifically travel to a specialty consumer electronics store (or store(s)) to
compare the range of possible product choices. As such, a slightly larger
proportion of sales in this market are characterized by impulse purchases made
while the consumer is already in the store- favoring retail outlets with a broader
product range such as department stores and discount retailers (see below).
Department Stores
Department stores have traditionally been characterized by the following marketing
mix attributes:
A broad, deep assortment of product lines

An array of customer services such as credit plans
Strong emphasis on branded goods, personal service and convenience
Non-price competition
In m2g, Department stores account for approximately 1/3 of all purchases made in
each of the Youth, Sports and Standard segments, as detailed below:
YOUTH SEGMENT
Department stores are less popular with consumers in the youth segment,
accounting for less than 1/3 of sales (by volume) in this target market. This is
largely reflective of the fact that large category killer stores compete more
effectively on the price dimension, despite the fact that department stores share
many of the favorable characteristics of consumer electronics stores with regard to
customer service and product assortment. Price is a primary consideration of the
typical purchaser in this segment (middle aged buyer with children) this distinction
has a large effect on relative demand between consumer electronics and
department store channels in the youth segment.

Department stores account for a slightly smaller proportion of total sales (by
volume) than consumer electronics stores in this segment. This is largely reflective
of the fact that sales assistance is likely to be more comprehensive in CE stores by
virtue of the fact that advice/expertise and support services are more specific to the
PMP product line than in a broader line Department store. This is especially
important for consumers in this segment who require comprehensive advice
regarding styling and technological features, as well as after sales service such as
warranties and repairs (owing to the demanding usage of the product as part of
recreational activities).
STANDARD SEGMENT
Department stores comprise a marginally smaller proportion of sales volume than
CE stores in the standard segment. This reflects the pricing advantage of Category
killer stores and the modest price sensitivity of consumers in this segment in a
similar fashion to the youth segment. Note that the difference between the
proportion of purchases made in Consumer electronics and Department stores is
the smallest in the standard segment. This largely reflects the fact that the wide
array of product lines offered by Department stores attracts some impulse
purchases by consumers as they notice products whilst shopping in the store.
Discount Stores
Discount stores adopt the converse marketing mix to that of consumer electronics
stores. This involves the presentation of a broad, shallow product line at low prices
with few attendant customer services. As such the factors that contribute toward
the success of CE stores in this market count against distributors adopting this type
of marketing mix so this type of distribution channel accounts for less than one
quarter of all sales (by volume) in the aggregate PMP market. These factors are
described for each market segment below:
YOUTH SEGMENT
Only one in ten portable music players for the youth market are purchased from a
discount store. The poor performance of distribution in this segment is related to
the following factors:
Shallow product range is incompatible with end-user emphasis on styling (see

CE stores above)
Marketing mix is less suited to middle aged purchaser demographic:
Limited levels of product advice
Products offered are typically cheaper, non-branded portable music players.
Thus, distributors in this segment pass over the opportunity to stimulate
demand in this purchase market through the inclusion of branding as part of
overall promotional efforts.

Less than a quarter of all sales to the sports segment are made through discount
stores. This reflects the fact that sports consumers are prepared to pay high prices
in order to receive excellent customer service and product selection to satisfy their
specific requirements in terms of technological features and styling. By avoiding
branded goods, consumers are also less inclined to perceive that a particular
product will be of reasonable quality or that they will receive good levels of after
sales service from the manufacturer (such as warranties and repairs given the more
extreme usage demands placed on products by this segment).
STANDARD SEGMENT
Sales volumes in discount stores are comparable to that of department stores. This
reflects the fact that while discount stores offer reduced customer services relative
to department stores (an important consideration in the purchase process for this
segment) they remain more price competitive. In addition, Discount stores benefit
from a large amount of foot traffic (and hence impulse purchases) relating to their
broad product range (and cheap prices) in a manner similar to that of department
stores (see above).
Product Segments and

Promotion
The response of the market segments to various promotional methods/media is
heavily influenced by purchase behavior and demographic profile of consumers in
each segment. The media preferences for each segment are given below:
YOUTH SEGMENT
Mass media channels such as television and radio as well as broad focused sales
promotional activities heavily influence the youth segment. In particular, sales in
this segment respond well to point of purchase displays and overall branding
expenditures. These behaviors are related to the following characteristics of
consumers in this segment:
Younger age groupings have a higher tendency to make purchases on impulse.

This is especially true of purchases made in broad product line stores
frequented by consumers in this segment (see Distribution for more
information).
A large proportion of children/teenagers watch television and/or listen to the
radio on a daily basis, so advertising reach is particularly high in this segment.
Reference groups in this age category heavily influence purchases.

Consumers in the sports segment are best reached through more targeted
promotional activities than the youth segment. This includes advertising in specialty
sports magazines and trade promotion through the training of retailers' sales staff
in the range of product features available in the high-end (high technology and
styling) portable music players. Note also that product branding is an integral part
of promotion in this segment.
Consumers in this segment pay particular attention to product specifications, as a

result:
The steps of the identification and evaluation of alternatives is longer than

other product segments (point of sale promotions are less effective).
Consumers require knowledgeable sales assistant support in making the
selection of a product.
Functionality and reliability are important determinants of segment demand. As
such consumers use branding as an indicator of quality when making a
purchase decision.
Advertisements need to provide a range of product information within the
message. This is well suited to the large, high resolution, color advertisements
available in magazines. In addition, magazines are typically read in a leisurely
fashion (in contrast to newspapers), during which time the reader has time to
consider the information. Magazines are also typically targeted at a narrow
customer segment, minimizing wastage in advertising effort (only prospective
consumers will be reached by the advertisement).
As a consequence of leading a more active life-style, consumers in this segment

spend less time watching television, reading newspapers or listening to the radio. It
is thus typically harder to reach consumers in this segment through these
traditional mass-market media than other segment groupings such as youth.
STANDARD
Behavior in this segment incorporates elements of both the youth and sports
segments. This is reflected in the fact that consumers can be reached through a
number of mass media channels such as newspapers and radio, while sales are also
responsive to trade and consumer promotion initiatives in the form of sales training
and coupon/cash rebates. These behaviors reflect the following characteristics of
this segment:
Product lifecyle and Promotion

In addition to the above considerations with regard to behavioral characteristics of
the target market audience, the optimal promotional mix is influenced by the
product lifecyle stage of a portable music player.
This relates to the fact that the mix of promotion and hence the promotion
objective will vary depending on the market situation in terms of consumer and
distributor perceptions towards the product.
In m2g we do not clearly distinguish between the introduction and growth phase of
the product lifecyle. It is assumed that the PMP market is an existing market with
an inherent demand for PMPs and that products rapidly transition into the growth
phase in their first year of product launch. So when your staff put forward potential
promotional strategies for each of your products they will only provide options for
growth, mature and decline, where the growth strategy can also be used for
product launch. As a rough rule of thumb, all products will enter a decline phase
within 6 years of their initial product launch, or earlier if you fail to regularly update
their design.
The various promotional objectives and their links to the stage of a product's
lifecyle in m2g are summarized in the table below (for completeness it also
describes the introduction stage):
Objectives Emphasis of Object at Stage of

Product Life Cycle
General Advertising Sales Intro Growth Mature Decline

Objective Objective Promotion
Objective
Awareness Generate Facilitate High Med Low Med

attention personal
Let the buyer selling (Reminding
know that the Introduce a remaining
product exists new product Trade customers)
& ease the Shows
way for the
sales force
Knowledge Communicate Improve High Med Low Low

how to use marketing
Learning the product performance
about the of retailers
product's
features Sales Force
training
Website
Liking Generate Stimulate Low Med High Med

demand for household
Associating product demand
the product category
with Premiums
attractiveness
Preference Build brand Supplement Low Med High High

preference Advertising
Distinguishing
among Website
brands.
(Direct
comparisons)
Conviction Maximize Support Low Med High High

conversion of Conversion
Securing prospects (Early
actual into Point of adopters
purchase or purchasers Purchase at this
commitment Displays stage)
Purchase Counteract Support Low Low Med High

Substitution decision to
Avoid delay purchase
or
postponement Rebates
Media Selection
In m2g, there are four media choices available to you to advertise your products:
Radio
Magazines
Newspapers
Television (TV)
Each media choice offers different performance in terms of reach, ability to target
and cost. Read below to learn more about each available medium.
Radio
Radio is a low cost per thousand medium because of its broad reach. Nearly 80%
of Americans listen to the radio daily and, on average, adults 18 years of age and
over listen to more than 20 hours a week. Radio commercials can be produced
quickly at a cost far below television.
The figure below gives a broad estimate of the likely cost of reaching the total
population of radio listeners. For example from the figure below we can see that a
budget of $4m would reach approx 50% of the total radio listening population, if
approx 80% of your target segment listen to the radio then you will have reached
approx 0.80*0.50=40% of the consumers in your target segment.
Figure 11: Advertising Reach versus Cost for Radio
In m2g you have a choice of 6 major radio station formats that you can advertise
on that are most popular formats with PMP buying consumers:
Contemporary Hits Radio (CHR)

Urban
Country
Rock
Adult Contemporary (AC)
Alternative
The relationship of this medium to the three potential target segments is outlined
below:
YOUTH SEGMENT
The ability of mass media channels to efficiently reach youth audiences is
demonstrated by the listening habits of this segment . As figure 3 shows, the top
two radio station formats account for nearly two-thirds of all listeners in this age
grouping. This reflects in part the fashion driven, 'populist' characteristics of
preferences in this product market, and the fact that the range of radio formats
allows advertisers to pinpoint the teen market quite accurately. As a result,
advertisers can limit promotional efforts to two or three format types and
confidently reach most of the audience in this segment.
Figure 12: Radio listening profile of the youth segment


The listening habits of sports consumers are highly fragmented in relation to the
youth segment. This in part relates to the fact that young adults (25-34) comprise
a majority of purchasers in this segment and that this age group's music tastes are
largely split between Contemporary Hits Radio (CHR), Adult Contemporary (AC) and
Urban formats. Note also that the total reach of radio is considerably less than the
youth segment. This reflects the fact that average listening time is less than other
segments due to the pursuit of a more physically active lifestyle. As such in order
to achieve a reasonable level of reach in this segment a firm must advertise on at
least three different station formats in order to reach more than half of potential
consumers from this segment.
Figure 13:Radio listening profile of the sports segment

STANDARD SEGMENT
The listening habits of standard consumers are broadly comparable to those in the
sports market. This is reflective of the fact that the age profile of customers is
broadly comparable between the two segments.
Note that whilst the distribution of listeners by format type is broadly similar the
proportion of the total segment that listens to radio is much higher in the standard
segment, reflecting the fact that consumers in this segment typically listen to the
radio for longer on average every day than sports consumers (refer sports segment
above). This implies that the effective reach for any given format type is much
higher in the standard than sports segment (i.e. higher overall effectiveness of
radio advertising in the standard vs. sports segment).
Figure 14: Radio listening profile of the standard segment

Magazines
Magazines can reach a national market at relatively low cost per reader. In recent
years, the rapid increase in special-interest magazines and regional editions of
general interest magazines has made it possible for advertisers to reach a selected
audience with a minimum of wasted circulation. Note also that this print media is
usually read in a leisurely fashion, in contrast to other forms such as newspapers.
This feature is especially valuable to the advertiser with a lengthy or complicated
message .
population of magazine readers. For example from the figure below we can see
that a budget of $2m would reach approx 52% of the total population of magazine
readers, if approx 40% of your target segment reads magazines then you will have
reached approx 0.40*0.52=21% of the consumers in your target segment.
Figure 15: Advertising Reach versus Cost for Magazines
below:
YOUTH SEGMENT
Magazine readership patterns in the youth segment are broadly reflective of radio
viewing habits, with a high concentration of readership in one category of the
medium (teen lifestyle magazines). This reflects the importance of reference groups
and opinion leaders to this segment and thus popular style/fashion trends for the
under-18 age group. In contrast to radio however the total potential reach of
magazines is small relative to other segments. This is indicative that consumers in
this segment spend less time reading than the older representatives of other
segments.
Figure 16: Magazine Readership Patterns- Youth Segment

A larger proportion of sports consumers read magazines than any other segment.
This can be related to the following:
Sports consumers are the least price sensitive consumer segment and so are
the most likely to purchase luxury goods such as magazines.
Consumers in this segment display the longest product identification/alternative
evaluation stages of the buying decision process. The magazine format is thus a
preferred information source since the format of this medium facilitates
extensive comparisons through the provision of detailed
information/opinions/reviews.
For similar reasons to those stated in point two above a majority of consumers in
this segment also refer to sports magazines for specific news, opinions/reviews and
information relating to the various recreational activities that they pursue-see figure
7 below. This high rate/concentration of readership make magazines an effective
promotional medium to reach this consumer type.
Figure 17: Magazine Readership Patterns- Sports Segment
STANDARD SEGMENT
Magazine readership is distributed over a number of categories in a manner similar
to format preferences for the radio medium. This is reflective of the fact that this
segment encompasses individuals from a variety of backgrounds and interests in
contrast to the fashion-oriented youth or the recreational focused sports consumer.
Note that the total rate of readership for magazines is slightly higher than the youth
but less than for the sports segment. This can be related to the following:
The older age grouping of the standard segment reads more on average than
youths.
The standard consumer is more price conscious than their sports counterpart,
and thus less likely to purchase magazines (a luxury item).
Thus, magazines represent a medium in which only moderate reach is achievable to

the target consumer. For example, advertising across several magazine categories
would at best reach less than half of all potential consumers in this segment.
Figure 18: Magazine Readership Patterns- Standard Segment
Newspapers
Newspapers reach a relatively large mass audience throughout a geographic region
with a single exposure, at a relatively low cost per thousand. It is important to note
that the readership of newspapers is heavily influenced by age. As shown in the
figure below the proportion of individuals reading the newspaper on a regular basis
(i.e. daily) increases steadily over ascending age groups, peaking at almost ¾ of
the adult population over the ages of 45. This therefore forms a principal basis for
variations in readership between segments and thus the effectiveness of
newspapers as a promotional medium, as summarized below:
Figure 19: Newspaper Readership vs. Age

population of newspaper readers. For example from the figure below we can see
that a budget of $6m would reach approx 84% of the total population of newspaper
readers, if approx 50% of your target segment reads newspapers then you will
have reached approx 0.84*0.50=42% of the consumers in your target segment.
Figure 20: Advertising Reach versus Cost for Newspapers
below:
YOUTH SEGMENT
Newspapers demonstrate poor reach in the youth segment. This is reflective of the
fact that
Youth age groupings spend a larger proportion of free time watching television
or listening to the radio than reading newspapers and/or magazines - see figure
below.
The broad coverage of topics in the newspaper is inconsistent with this
segment's emphasis on teen related style and fashion trends.
As a result, the proportion of youth consumers reached by a newspaper

advertisement is approximately 1/3 that of other segments.
Figure 21: Newspaper Readership Youth Segment


The overall rate of newspaper readership is considerably higher in the sports than
youth segment. This reflects the following:
The older age groupings in this segment spend a larger proportion of their free
time reading than youths.
Consumers in this segment can be more effectively targeted within the
traditional newspaper format through a sports section.
Nonetheless, this medium's maximum potential reach is less than half of all
prospective customers. This entails a higher degree of wastage in advertising since
advertisements are delivered to a broad cross section of individuals outside the
targeted segment.
Figure 22: Newspaper Readership Sports Segment
STANDARD SEGMENT
Newspapers are a relatively effective means of reaching the standard product
segment, in contrast to sports and youth consumers. This reflects the fact that:
Like sports consumers, individuals from this segment are represented by older
age groupings that tend to spend proportionately more of their free time
reading as opposed to listening to the radio, watching television etc.
The broad range of topics covered in the newspaper format attracts readership
from a wide variety of interests. This is consistent with the composition of the
standard segment, which share little more in common than age and income
groupings.
Consequently, an advertiser can potentially reach approximately 2/3 of their

intended target market through newspaper advertising. This reduces the incidence
of advertising wastage and suggests that this medium deserve serious
consideration as part of a promotional program directed at the standard segment.
Figure 23: Newspaper Readership Standard Segment
Television
Television is the most effective method of reaching a large audience. This is
reflected in the fact that virtually every household in America has a television and
that over 85% of all age groupings watch television at least once a day. The
television medium also has the advantage of combining motion, sound and special
visual effects into an advertisement. As such it offers wide geographic coverage and
flexibility in which a message can be presented. However, TV ads lack permanence
(so they must be seen and understood immediately) and are expensive relative to
other forms of media.
population of television watchers. For example from the figure below we can see
that a budget of $8m would reach approx 85% of the total television watching
population, if approx 88% of your target segment watch television then you will
have reached approx 0.85*0.88=75% of the consumers in your target segment.
Figure 24: Advertising Reach versus Cost for Television
below:
YOUTH SEGMENT
Television is a highly effective medium with which to reach the youth segment. This
reflects the fact that youths spend a high proportion of their free time watching
television compared to other activities associated with promotional media i.e.
reading newspapers and magazines and listening to the radio. Note that television
complements radio well in this instance - the message on television is short and
must be understood immediately, whilst radio is more cost effective, thereby
facilitating more repetitions of an advertisement in a given time frame .
Figure 25: Daily TV Watching Habits Youth Segment

Television reach in the sports segment is slightly less than the youth segment. This
reflects that sports consumers spend more free time in the pursuit of recreational
activities. Despite this, the overall reach attained by television is considerably
higher than any other available promotional media types. For reasons similar to
those outlined for the youth segment above, television and magazine advertising
would serve as useful complements to one another. This relates to the fact that
product awareness is achievable through television whilst a more comprehensive
promotional message can be delivered through magazines (refer magazine section
above).
Figure 26: Daily TV Watching Habits Sports Segment

STANDARD SEGMENT
Total television viewing by standard consumers more closely resembles the youth
market than the sports segment. This relates to the fact that they devote a larger
proportion of their free time to watching television than their sports counterparts,
although total available free time is distributed over a greater number of activities
than the youth segment. Note that television and newspaper advertising would
form useful complements to one another in the standard segment. This relates to
the fact that excellent product awareness is achievable through television, whilst
newspapers provide a more cost effective, detailed medium through which an
advertising message can be effectively presented to the intended audience.
Figure 27: Daily TV Watching Habits Standard Segment
Sales Promotion Activities

In m2g, there are 6 types of sales promotion activities available to you to promote
your products:
Trade Shows
Sales force Training
Premiums (Gifts)
Website
Point of Purchase displays
Rebates
Each promotional activity has particular relevance to certain stage of the product
lifecycle as outlined in the material below.
TRADE SHOWS
The appeal of consumer electronics trade shows is their efficiency. In one place
and in a compressed amount of time you will be able to interact with a large
number of retailers to promote your new products.
However trade shows are expensive, your trade show budget will need to cover the
cost of a booth, living expenses for your company representatives attending the
show and the transportation costs of sending your equipment and display material.
Assuming a sales promotion budget of approximately $5 million the table below

gives recommendations on how much to spend on your products in each stage of
their product lifecycle.
Figure 28: Trade Show Budget Recommendations
Product Life Cycle Stage

Segment Growth Mature Decline
Youth 15% 5% 5%
Sports 20% 5% 10%
Standard 20% 5% 10%
In m2g trade shows are particularly important for launching Sports and Standard
PMPs as they are often more technologically advanced than earlier models and are
a harder sell to retailers than Youth PMPs following new fashion fads.
SALES FORCE TRAINING

Sales force training expenditure is money invested in training your sales staff on
how to sell your products to retailers and money invested in training your retailers
sales force staff to effectively sell your products. PMPs are a technology product
and the Sports segment in particular demands that the person selling them a PMP
must be able to adequately describe its features especially if they are shopping at a
CE or Department store.

Figure 29: Sales Force Training Budget Recommendations

Youth 25% 10% 5%
Sports 30% 20% 20%
Standard 20% 5% 5%
In m2g, training is one of the major sales promotion activities involved in launching
new products. However, it is expected the Sports products will have their design
updated on a regular basis and that sales force training will be required throughout
the product life cycle.
PREMIUMS (GIFTS)
Manufacturers are under pressure from retailers to provide attractive product
prices/offers to secure prominent shelf space and from some consumers to lower
price. Premiums are a way of enhancing the product offering without the concerns
that discounting causes about damaging the products brand. Typical premiums for
PMPs include carry cases and car kits.

Figure 30: Premiums Budget Recommendations

Youth 15% 35% 25%

Sports 25% 40% 25%
Standard 25% 40% 25%
In m2g premiums are an important way of improving sales performance throughout

the product lifecycle, but are particularly important during the mature phase when
products are fighting to secure prominent shelf space.
WEBSITE
A company website provides an opportunity to showcase your products, their
features and their recommended retail prices. Your company has a strict policy of
only supplying products B2B and does not do B2C sales directly to consumers.

Figure 31: Website Budget Recommendations

Youth 10% 5% 5%
Sports 5% 10% 10%
Standard 5% 10% 10%
In m2g the majority of the retail, chains have their own retail web sites and have
limited online sales of PMPs. The purpose of investing in your company website is
to give your retailers a place to hyperlink consumers to so that they can find out
more information about your products.
POINT OF PURCHASE DISPLAYS

Point of purchase display allowances encourage your retailers to give your products
more prominent shelf space than your competitors and it is also thought to make
consumers choose your brand when they get to the point of purchase.

Figure 32: Point of Purchase Displays Budget Recommendations

Youth 25% 25% 25%
Sports 15% 20% 20%
In m2g point of purchase, displays are effective with all market segments
throughout the product life cycle. However they are particularly effective in the
youth market where younger shoppers are often impulse buyers and older shoppers
are often searching of a gift for younger relatives, in both cases a point of purchase
display is likely to influence them to choose your product.
REBATES
Coupons are the most frequently used form of sales promotion by manufacturers of
low value fast moving consumer goods (FMCG). However, for higher value
consumer electronics goods then mail in rebates are the preferred way to give
consumers discounts. A mail in rebate provides the consumer with a discount and
in return, the manufacturer gets the opportunity to learn who bought their product,
when and where they bought it and some clues as to why.
Figure 33: Rebates Budget Recommendations

Youth 10% 20% 35%
Sports 5% 5% 15%
In m2g, the Youth and Standard segments respond well to rebates and it is an
especially effective means of promotion during the mature and decline stages of
their product life cycle. However, the Sports segment views discounted items as
being of poor quality and given their preference for products at the leading edge of
technology only a small rebate budget is required mainly for purchases made
through discount stores.
44
CHAPTER 4
Implementation
IN THIS CHAPTER
Decision Screen Overview.......................................... 45
Product Development................................................ 45
Price ....................................................................... 48
Advertising .............................................................. 49
Sales Promotion ....................................................... 50
Sales Force Management ........................................... 51
Inventory Management ............................................. 52
Decision Screen Overview

There are two types of decisions that you are required to make in m2g:
Product Management. The marketing mix decisions for each of your products
including; product development, price, advertising and sales promotion
decisions for your products.
Distribution. Firm level decisions about how large a sales force to maintain for
each retail channel and what inventory levels to maintain for each of your
products.
In the rest of this chapter, we will describe these decisions in more detail.
Product Development
When you select the Product Development tree item you are given access to a
series of reports about the performance of your product(s). See the Evaluation
chapter for more information about reports.
Expanding the Product Development tree item gives you access to your product
slots.
Existing Product Screen

The existing product decision screen is used to make decisions regarding the
redevelopment of your existing products.
The diagram on the right hand side of the screen displays a perceptual map for
consumers in the m2g market. It shows the relative positions of the different
segments in this overall market, based on a combination of two factors:
The Style Value, which represents the aesthetic style and design of a product.
The Technical Value that reflects the technical features and components
incorporated in the product design. This includes factors such as construction
materials and strength.
Chapter 4 Implementation 45
The center of each perceptual circle represents the point that satisfies as much of
the given segment as possible. This is suggestive of an "ideal" product specification
consistent with sales maximization for a given target market. For example, consider
a product that exceeded the style and technical values of a segment that was sold
at the same price as one that met the market needs exactly. The "better" product
would sell less because it does not suit consumers' requirements as well as the
other product. This reflects the fact that unnecessary features can be annoying to
someone who wants a simple product, and extra style and design attributes can
reduce a product's performance and functionality.
The existing products screen requires you to make up to two decisions.
CHOOSING A PRODUCT PLAN

The Product Plan box at the top left of the screen is used to indicate your
development intentions for this product. You have three choices:
Keep the current design

Update the product by changing it to a new design
Abandon the product
Keeping the current design means doing nothing this year. You will continue to sell
last year's model for another year.
Updating the product with a new design allows you to select a new improved design
from below.
Abandoning the product means that you no longer want to sell this product any
longer, it will be withdrawn from the market, and any existing inventory will be
dumped at 80% of the price you paid for it. For example if you have $1 million
worth of inventory, then you will only receive $800,000 and make a $200,000
inventory disposal loss this year.
Deciding which choice to make should be part of your positioning strategy that you
set in your strategic marketing plan.
SELECTING AN AVAILABLE DESIGN

The Available Designs box lists all the designs that you can redevelop your existing
product with.
Each design has a:
Cost to develop
Unit Cost
Style Value
Technical Value
Generally you will be offered three options each year:
Productname_spec_year (improve the product's technical and style values)

Productname_cost_year (reduce the product's unit cost)
Productname_spec_cost_year (do both)
E.g. if next year is 2009 and your product's name is Sonic, then option 1 above
would be Sonic_spec_2009.
Note: In m2g Multi-Player some segments may overlap. If your product is

positioned in the overlapped area between two segments then you might get as
many as six options.
Generally, a specification improvement project costs the same as a unit cost

reduction project and the combined project costs double. A specification project
will make your product more attractive to the market but will still be a cost
attributed to your marketing expenses, while a cost project will not improve your
products attractiveness but will reduce your unit costs allowing you to make more
profit per unit sold.
Choosing which project to implement should be clear from your marketing

objectives in your annual marketing plan.
Empty Product Slot Screen

For empty product slots you have two choices:
Launch a new product

Do nothing this year. (The product slot will still be available to you the
following year)
The launch new product decision screen is used to make decisions to use empty
product slots available to your m2g firm.
The diagram on the right hand side of the screen displays a perceptual map for
consumers in the m2g market. For a detailed description of the perceptual map,
see the description under the existing products screen above.
The launch a new product screen requires you to make up to three decisions.
PRODUCT NAME
The Product Name box at the top left of the screen is where you need to type the
name of your new product. Your product name can be any name up to a maximum
of 12 characters. The product name you choose has no effect on product demand
in m2g, but as marketing professionals you should be choosing a name that reflects
your positioning strategy for this product.
SEGMENT SELECTOR
The Segment Selector box at the top left of the screen is used to select the
segment that you would like to see designs displayed for. If you would like all
available designs displayed, select "All".
SELECTING AN AVAILABLE DESIGN

The Available Designs box lists all the designs that you can redevelop your existing
product with. Select the design you wish to launch and push the apply button.
Generally, you will be offered one potential design for each market segment. You
will be offered designs based on what existing products you already have. E.g. If
you already have a standard segment product then the new design project offered
to you will be no worse than your existing product. If you only have a standard
product and you upgrade its design this year then next year you will probably often
be offered a better youth product design project than you were this year due to
your product engineers increased experience of developing PMPs.
Choosing which project to implement should be clear from your marketing

objectives in your annual marketing plan.
Price
When you select the Price tree item you are given access to a series of reports
about pricing and retailer margins of your products and your competitors. See the
Evaluation chapter for more information about reports.
Expanding the Price tree item gives you access to your products. You start m2g
with a single existing product, but will eventually be able to launch a maximum of
six.
Product Pricing Screen

The Product Price screen is used to enter retail pricing, retailers' margin, which
retail channels to supply and retail channel sales forecasts decisions for your firm's
selected product for the coming year.
This is the decision screen where you decide what decisions to make to implement
your pricing and distribution strategy for your product from your annual marketing
plan.
RETAIL PRICE
The Retail Price is the retail price that you recommend to your retailers that they
sell your product for. It is important to remember that while increasing price will
increase the gross margin made on sales (and thereby increase profit per unit) the
ultimate effect on total profit will depend on the responsiveness (fall) of market
demand to this change in price (and vice versa). Similarly, the price choice of all
products in the market will affect the relative market shares enjoyed by each
competitor, so if you all reduce your price equally, then your relative market shares
could remain the same.
RETAILER MARGIN
The Retailer Margin indicates the percentage of a product's retail selling price that
the retailer receives as commission for selling that product. The number of retailers
that choose to stock your product is partly due to the absolute amount of money
that they gain from selling your product.
The amount of money that retailers receive is equal to the sales volume that they
sell times the commission they get per unit. So increasing your retailer margin will
increase the number of retailers willing to stock your product provided that your
sales do not decrease from last year.
RETAIL CHANNELS
The Retail Channels box at the bottom of the decision screen requires you to make
two decisions:
Which retail channels to supply your product too?

How many units you think you will sell in each retail channel?
The first decision you need to make is which retail channels to supply. The
advantage of concentrating on one or two retail channels instead of all three is that
you concentrate your sales promotional efforts and sales through fewer channels so
you increase sales through the channels that you do supply. This can lead to you
getting more stores stocking your product and better distribution coverage than if
you dissipated your sales across all possible retail channels. The disadvantage of
supplying a limited number of retail channels is that not all consumers shop for
PMPs in all retail channels, so if your product is successful then you will be losing
potential sales by not stocking in all retail channels.
One last point to bear in mind is that in m2g retailers would prefer to stock no more
than one product per firm per market segment, if you ask them to stock two or
more then some stores will choose to only stock their favorite leading to reduced
distribution coverage for your products in that segment. So sometimes when
launching multiple products into a single segment it is worth considering supplying
them to different retail channels.
The second decision you need to make is to forecast how many units you think you
will sell through each retail channel. If it is an existing product then you can find
out how many units you sold last year by clicking on the Previous Year tab.
The purpose of the sales forecast is twofold. Firstly, to let you know how many
sales you expect when you decide how many units to order on your Inventory
decision screen. Secondly, to allow the m2g software to generate pro-forma
financial statements for you under Forecast Results so you can tell how much net
marketing contribution you will make if all of your sales forecasts are accurate.
Advertising
When you select the Advertising tree item you are given access to a series of
reports about the advertising budget of your firm and your competitors. See the
Evaluation chapter for more information about reports.
Expanding the Advertising tree item gives you access to your products and your
Advertising Strategy screen. You start m2g with a single existing product.
Advertising Strategy Screen

The Product Advertising Strategy screen has two purposes:
To enter the advertising budget for each of your firm's product(s) for the
coming year.
To decide what advertising strategy to employ; growth, mature, decline or
custom.
The Strategy template section allows you to select a suggested advertising decision
template for your product based on your analysis of which stage the product is in
its lifecyle. Selecting a template ("Growth" for example) will fill in suggested
advertising budget and media allocation values that are appropriate for a product in
the initial "Growth" phase of its lifecyle. If you then want to tweak these suggested
values, select the "Custom" template before doing so.
The Advertising field indicates the advertising budget for this product for the
upcoming year. On another screen this budget will be allocated to the various
media channels. A higher budget will generally lead to higher levels of awareness
and demand for the product, but the extra sales may not cover the extra cost of
advertising.
Choosing whether to implement a strategy template and how much budget to

allocate should be clear from your marketing objectives in your annual marketing
plan.
Product Advertising Media Allocation Screen

The Product Advertising Media Allocation screen is used to allocate the product's
advertising budget to the various media channels for the coming year.
You do not need to make any decisions on this screen if you chose to implement a
growth, mature or decline advertising strategy for your product. If you change any
of the allocations then your strategy template decision will be changed to custom.
Otherwise, you need to decide what percentage of your product's advertising

budget to allocate to each media type. When choosing which media type you need
to bear in mind how much budget you have and what the media preferences are of
the segment that you are targeting.
Product Advertising Media Subcategory Screen

The Product Advertising Media Subcategories screen is used to allocate product
advertising to the subcategories within a particular media channel. Note that only
Radio and Magazines require subcategory allocations.
growth, mature or decline advertising strategy for your product. If you change any
of the allocations then your strategy template decision will be changed to custom.
Otherwise, you need to decide what percentage of your product's media budget to
each subcategory type. When making your decision you need to bear in mind what
the subcategory media preferences are of the segment that you are targeting.
Sales Promotion
When you select the Sales Promotion tree item you are given access to reports
about the sales promotion budget of your firm and your competitors and your
current revenue per store per channel. See the Evaluation chapter for more
information about reports.
Expanding the Sales Promotion tree item gives you access to your products and
your Sales Promotion Strategy screen.
Sales Promotion Strategy Screen

The Sales Promotion Strategy screen has two purposes:
To enter the sales promotion budget for each of your firm's product(s) for the
coming year.
To decide what sales promotion strategy to employ; growth, mature, decline or
custom.
The Strategy template section allows you to select a suggested sales promotion
decision template for your product based on your analysis of which stage the
product is in its lifecyle. Selecting a template ("Growth" for example) will fill in
suggested sales promotion budget and subcategory allocation values that are
appropriate for a product in the initial "Growth" phase of its lifecyle. If you then
want to tweak these suggested values, select the "Custom" template before doing
so.
The Sales Promotion field indicates the sales promotion budget for this product for
the upcoming year. On another screen, this budget will be allocated to the various
subcategories. A higher budget will generally lead to increased sales in each of the
stores stocking the product, but the extra sales may not cover the extra cost of
sales promotion.
Choosing whether to implement a strategy template and how much budget to

allocate should be clear from your marketing objectives in your annual marketing
plan.
Sales Promotion Allocation Screen

The Product Sales Promotion Allocation screen is used to allocate the product sales
promotion budget to the various sales promotion activities.
growth, mature or decline sales promotion strategy for your product. If you change
any of the allocations then your strategy template decision will be changed to
custom.
Otherwise, you need to decide what percentage of your product's advertising

budget to allocate to each type of sales promotion activity. When making your
decision you need to bear in mind what the sales activity recommendations are for
the segment that you are targeting. E.g. the sports segment does not favor
rebates.
Sales Force Management

When you select the Sales Force Management tree item, it takes you straight to the
decision screen. For reports relating to sales force management click on the
Distribution tree item or the reports tab on the decision screen.
See the Evaluation chapter for more information about reports.
The Sales Force Management decision is made for your whole firm and not
individual products.
Sales Force Management Screen

The Sales Force Management screen is used to determine the number of sales
representative (rep) that you will hire to promote your products to the retail stores
in each retail distribution channel.
You are required to make two decisions for each retail channel:
How many sales reps to employ?

What size salary package to offer them?
Choosing which retail channels to target your sales rep budget at should be clear
from your marketing objectives in your annual marketing plan.
SALES REPS
The Sales Reps field is where you indicate how many sales reps you plan to have
promoting your products to this this retail channel. The more reps you have, the
more stores you will be able to convince to stock your products.
SALARY PACKAGE
The Salary Package field is where you enter the salary package you are allowing for
each sales rep in this retail channel. Note that in this context the term "salary
package" covers things like the base salary, commission, other benefits, and
administrative support. In general, paying more will attract better sales reps and
thereby both increase the number of stores stocking your product and same store
sales.
Inventory Management
When you select the Inventory Management tree item, it takes you straight to the
decision screen. For reports relating to inventory management, click on the
Distribution tree item.
See the Evaluation chapter for more information about reports.
The Inventory Management decision is made for your whole firm and not individual
products.
Inventory Management Screen

The Inventory Management screen is used to decide how many units of each
product you want your firm to manufacture in the coming year.
For each product, given how much existing inventory you have and its forecasts
sales, you need to decide how many to order. To do this you need to decide how
accurate you think the forecast is, and how much safety stock (expected closing
inventory) you are prepared to accept.
52
CHAPTER 5
Evaluation
IN THIS CHAPTER
Evaluation Overview ................................................. 54
Industry Overview .................................................... 55
The Year Ahead........................................................ 58
Firm Results ............................................................ 59
Market Research Reports........................................... 61
Product Management Reports .................................... 62
Distribution Reports .................................................. 64
Forecast Results ....................................................... 65
Evaluation Overview
As stated earlier the management process for marketing consists of planning a
marketing program, implementing it and evaluating its performance as shown in
the figure below.
Figure 45: The Circular Relationship Among Management Tasks
In simple terms, the purpose of evaluation is to measure how far you have
progressed towards meeting your marketing objectives. Through evaluation, you
can observe what strategies and programs have worked well, and which have not.
Evaluating your current position will allow you go into the planning stage able to
review your marketing objectives and strategies in an informed manner.
The aim of this chapter is to guide you through the types of information and reports
available to you in m2g and to aid you with evaluating your performance.
Please note that all screenshots were taken from a pre-release version of m2g and
may slightly differ from the version you have.
Chapter 5 Evaluation 53
Major Reports Available

In m2g there are seven major report tree items that evaluate the performance of
the whole firm:
The Year Ahead. A brief overview of changes in the scenario this year and your
current marketing budget.
Industry Overview. A comparison of your firm's performance versus its
competitor(s).
Firm Results. A summary of your firm's financial performance over the
previous year.
Market Research. An opportunity to buy market research reports to try and
find a competitive advantage.
Product Management. Summary reports about the individual performance of
your products. It's sub-items; Product Development, Price, Advertising and
Sales Promotion also provide reports about their respective decisions.
Distribution. A summary of your distribution and inventory management
performance.
Forecast Results. Pro-forma financial results forecasting your firm's
performance for next year based on your sales forecasts being accurate, given
the decisions that you have made.
In a typical m2g year you will review your previous year's performance by reading
the Industry overview and Firm results reports. In your planning phase, you will
review the Year Ahead, Market Research, Product Management and Distribution
reports as part of your situation analysis.
Finally, you will enter your decision set and your sales forecasts and then review
your Forecast Results. If you are not satisfied with your forecast results then you
repeat the process of planning your decision set and forecasting sales.
Read below for more detailed information about each of the major report tree
items.
Industry Overview
When you select the Industry Overview tree item you are given access to a series
of industry level reports:
Industry Reports Overview. A memo summarizing the reports available.

Industry Benchmark Report. A summary of all firms' net marketing
contribution reports so that you can benchmark yourself against your
competitors.
Segment Sales in Units. A line graph of total units of PMPs sold in each market
segment. This allows you to see changes in total demand for each segment.
Market Share. A pie chart of market share percentages for each firm based on
retail sales revenue for the entire m2g market.
Multi-firm Wholesale Sales Revenue. A line graph of all firms' wholesale sales
revenue over time.
Multi-firm Net Marketing Contribution. A line graph of all firms' net marketing
contribution over time.
Multi-firm Cumulative Net Marketing Contribution. A line graph of all firms' net
marketing contribution over time. This is a measure of how consistently each
firm is maintaining high net marketing contributions over time. Note that it
only tracks from the moment that you took over management of your m2g firm.
You should be able to interpret the line graphs and pie chart unaided, but further
explanation of the Industry Benchmark Report follows below.
Industry Benchmark Report

The Industry Benchmark Report is a summary of all firms' net marketing
contribution reports so that you can benchmark yourself against your competitors
as shown in the figure below.
In real life, this information would be difficult to obtain, but this report has been
made available to you so you can learn from your competitors.
Figure 47: Industry Benchmark Report
There are several key parts of this report that you need to understand.
SALES AND GROSS MARGIN

The Sales Revenue listed for each is the total wholesales sales revenue of all of the
firm's products. The Cost of Goods sold is the total cost of goods sold of all of the
firm's products that were sold, which is the number of units of a particular product
sold multiplied by it's manufacturing cost. See the existing products decision
screen for each of your products to see their unit manufacturing cost.
Gross Margin is the amount of profit that each firm made after the manufacturing
costs were deducted. To increase your firm's gross margin you need to consider:
Increasing sales revenue, i.e. increase sales volume (units) and/or increase
price
Decrease Cost of Goods sold per unit, i.e. invest in product development
projects that improve unit cost.
INVENTORY COSTS
There are two types of inventory costs:
Inventory Holding Cost. Each year all firms are charged 5% of the value of
their closing inventory for inventory holding costs to cover the cost of
warehousing etc.
Inventory Disposal Loss. If a firm updates a product with a new design or
abandons it altogether then all existing inventory is dumped at 80% of what the
firm paid for it. e.g. $1m of inventory would be dumped for $800K giving a loss
of $200K.
You can gather some valuable market research from looking at the figures for your
competitors. Firms that have no inventory holding costs have stocked out, because
they are under forecasting demand for their products. Firms with large inventories
are over forecasting demand. If you see any inventory disposal costs, then you
know that your competitor has either, updated an existing product's design or
abandoned one.
PRODUCT MARKETING
This section shows the combined Product Advertising and Sales Promotion budgets
for all products that each firm is marketing. This allows you see how much money
your competitors are spending on promotion but not how they are allocating it to
individual products.
FIRM MARKETING
The Sales Force management budget gives you an indication of the size of your
competitors' sales force in comparison to yours.
The Market Research budgets lets you know whether your competitors are buying a
little or a lot.
The Product Development budget lets you know whether your competitors have
improved any of their products in the last year and/or launched new ones.
NET MARKETING CONTRIBUTION

Net marketing contribution is the amount of profit remaining after manufacturing
(cost of goods sold) and marketing expenditures have been deducted. The only
costs still to be deducted are other functional overhead costs for your firm, e.g.
finance, administration etc.
Net marketing contribution is a measure of how profitable your firm is as a result of

your strategic marketing plan. There are two ways that you can increase your net
marketing contribution:
Increase Gross Margin without increasing your marketing expenditure

Reduce Marketing Expenditure without reducing your Gross Margin.
How you achieve that is the challenge of m2g.

The Year Ahead

When you select the Year Ahead tree item you are given access to a series of three
reports:
The Year Ahead. A brief overview of changes in the scenario this year.
Strategic Marketing Planning. A reminder of the key steps involved.
Forecast Marketing Budget. Your available budget for this year's decisions.
The first two reports are self-explanatory but further explanation of the Forecast
Marketing Expenditure Budget report follows below.
Forecast Marketing Expenditure Budget

The forecast marketing expenditure budget shows you how much money you have
available to spend this year as shown in the figure below.
Figure 46: Forecast Marketing Expenditure Budget Report
There are three key parts of this report that you must understand.
BUDGET LIMIT
Your original base budget limit is set at either 50% of last year's gross margin or
$25 million; whichever is higher. See the Industry Overview section below for a
more detailed discussion of gross margin.
Your adjusted budget limit is that actual budget that you have available for this
period. This is your original base budget plus any adjustments. There are only two
possible types of adjustments:
If you launch a new product then you are given a one year $10 million budget
increase to fund the launch costs.
In m2g Multi-Player your course instructor is able to increase or decrease your

budget.
BUDGETED EXPENDITURE
The first column in this section shows how much money you currently have
allocated to product advertising, sales promotion, sales force management and
market research. Changing any of your decisions in these areas will automatically
update this report.
The second column shows you how much you spent last year.
AVAILABLE TO SPEND
This is how much unallocated budget you have left, i.e. how much money you still
have available to spend if you want to. Any money you spend will be deducted
from your net marketing contribution, so you should only spend money on activities
where you think the return will more than cover the cost.
If this number is negative that means that you have exceeded your budget and you
need to choose which marketing activities to cut back. If you do not do so yourself,
then the m2g will automatically reduce your Advertising and Sales Promotions
budgets during the rollover to bring you back within budget.
Firm Results
When you select the Firm Results tree item, you are given access to a series of firm
level financial performance reports:
Firm Reports Overview. A memo summarizing the reports available.

Net Marketing Contribution Versus Forecast. A comparison of your actual
results for the current period against your forecast result. The purpose of this
report is to review the accuracy of your forecasting so that you can evaluate
and improve your forecasting technique.
Net Marketing Contribution Versus Last Year. A comparison of your actual
results for this year versus last year. You may or may not have achieved your
forecast result, but this report will tell you whether your actual results have
improved on last year. Note that this report is unavailable in the first year of
m2g.
Net Marketing Contribution History. A table providing a history of your actual
net marketing contribution reports since you took control of your firm.
Marketing Budget. Shows you what your final marketing budget was for the
previous period. If you attempted to overspend your budget then this will also
show you which decisions were automatically reduced.
Last Year's Decisions. A report detailing the decisions that you entered last
year.
You should be able to interpret most of these reports unaided but an example of
the Net Marketing Contribution report is shown below to discuss forecasting.
Net Marketing Contribution Report

This report is a comparison of your actual results for the current period against your
forecast result. The purpose of this report is to review the accuracy of your
forecasting so that you can evaluate and improve your forecasting technique. An
example is shown in the figure below.
Figure 48: Net Marketing Contribution Report
The key components of this report (Sales, Inventory costs etc.) are explained in
detail above under the Industry Benchmark Report discussion. The purpose of the
discussion below is to clarify what data is used for each of the columns.
FORECAST RESULT
Your forecast sales revenue is based on the sales forecasts that you entered for
each of your products for each retail channel last year. The inventory holding cost
was forecast based on the amount of closing inventory that you forecast. All of the
other numbers are drawn from the decisions you entered.
ACTUAL RESULT
Your actual result is obviously the results that you actually achieved. If your actual
sales revenue is less than your forecast then you should:
Check your existing product decision screen on the previous year tab for each
of your products to see what your actual sales in units were for each retail
channel.
Consider purchasing Market Research to try to find out what impact
competitors' actions had on your sales
Read the product management reports for information on the individual

performance of each of your products.
VARIANCE
Is a simple percentage of how much different your actual is compared to you
forecast, e.g. (26)% means that it is 26% less than your forecast.
Market Research Reports

When you select the Market Research tree item it takes you straight to the decision
screen. This decision screen allows you to choose which market research reports to
purchase.
The Market Research decision is made for your whole firm and not individual
products.
Market Research Report Screen

The Market Research screen is used to decide which market research reports you
wish to purchase to help you make decisions for the coming year.
Clicking on the report, then clicking the 'Add' button selects reports. This will flag
the report, as selected for purchase and the cost will be added to the "Selected
Purchases" figure. Conversely, selecting a selected report and clicking the remove
button, removes it from the "Selected Purchases" figure. Once you have chosen all
the reports you want, press "Purchase" and the reports will be made available to
you via the decision tree on the left side of the screen and the money will be
deducted from your available funds.
Purchasing market research is an instant decision and cannot be undone. Once you
have purchased the report(s) and spent the money, it will no longer be available to
you for your other marketing activities this year.
Market Research Reports Available

There are two levels of market research available to you, Budget and Premium. As
indicated by their names, budget research is provided by cheaper companies and
tends to be of lesser quality, while premium research is of a higher quality and
price.
The following reports are potentially available each year.
INDUSTRY OVERVIEW
The following Industry level reports are available for purchase:
All Product Details Report. A complete comparison of all products in the m2g
market including price, sales volume, product awareness, distribution coverage,
and design rating.
Some Product Details Report. A comparison of all products in the m2g market
including price, sales volume and design rating.
Segment Size and Price Range Report. An estimate of the current potential size
of each market segment and its recommended retail price range.
Segment Media Advertising Preferences. Media viewing habits for each

segment including advertising sensitivity and a recommendation for an ideal
product awareness.
Segment Distribution Preferences. Shopping habits for each segment including
distribution sensitivity and a recommendation for an ideal distribution coverage.
Perceptual Map of all Products. A perceptual map for the m2g market showing
all segments ideal points and all products.
ADVERTISING PERFORMANCE
The following Advertising performance reports are available for purchase:
Product Awareness Increase Due to Media Advertising. The increase in product

awareness of each of your products due to each media type that it was
advertised in last period.
DISTRIBUTION PERFORMANCE
The following Distribution performance reports are available for purchase:
Consumer Electronics - Product Stocking. How many consumer electronic

stores are stocking each product in the m2g market.
Department Stores - Product Stocking. How many department stores are
stocking each product in the m2g market.
Discount Stores - Product Stocking. How many discount stores are stocking
each product in the m2g market.
All Products Sales Promotion Effectiveness. An analysis of the effectiveness of
your sales promotion strategy for each of your products.
Product Management Reports

When you select the Product Management tree item, you are given access to a
series of reports about the individual performance of your products. It's sub-items;
Product Development, Price, Advertising and Sales Promotion also provide reports
about their areas.
Product Management Reports Overview. A memo summarizing the reports

available.
Product Contribution. A detailed side-by-side comparison of all of your products
results for the previous year.
Product Contribution History. A report per existing product giving a table of its
product contribution over time.
You should be able to interpret most of these reports and the sub-item reports
unaided but an example of the Product Contribution report is discussed in more
detail below.
Product Contribution Report

The Product Contribution report is a detailed side-by-side comparison of all of your
products results for the previous year. Its purpose is to allow evaluate the
performance of your products individually. Often you will be able to attribute the
failure to reach sales forecast to the poor performance of one particular product.
An example of this report is shown in the figure below.

Figure 50: Product Contribution Report
Each part of this report will now be described in more detail.
PRODUCT
The product name tells you what the name of your product is. The state tells you
whether it was upgraded last year, and the product development project tells you
what design this product is based on.
PRODUCTION
Starting inventory and Ordered (units) are taken directly from your Inventory
Management decision. Together they total the maximum possible sales that you
could have made last year. The closing inventory is how many you actually had
left.
SALES
Forecast sales came from your sales forecasts for each retail channel last year.
Actual sales are obviously your actual sales for last year. Estimated lost sales lets
you know if you lost any sales due to stock-outs (running out of inventory).
The "revenue", "cost of goods sold" and "gross margin" are for this particular
product. These terms are discussed in more detail above in the Industry Overview
section.
INVENTORY COSTS AND PRODUCT MARKETING

These costs are the ones that relate directly to this product. For a more detailed
discussion of these terms and concepts read the Industry Overview section above.
CONTRIBUTION AFTER PRODUCT EXPENSES

This is the contribution that this product made to your firm - i.e. how profitable this
product is.
Summing the total contribution for your products and then deducting the sales
force management, product development and market research expenditures
calculates net marketing contribution for your firm.
Distribution Reports
When you select the Distribution tree item, you are given access to a series reports
about your distribution and inventory management performance.
Distribution Reports Overview. A memo summarizing the reports available.

Multi-Firm Sales Force Budgets. A line graph of all firms' sales force
management budgets over time.
Product Channel Distribution Table. A table showing the individual distribution
performance of each of your products. Use this information to analyze the
distribution coverage of each of your individual products.
Product Inventory Line Chart. A line chart showing your inventory levels of
each of your products over time.
You should be able to interpret most of these reports unaided but an example of
the Product Channel Distribution table report is discussed in more detail below.
Product Channel Distribution Table

The Product Channel Distribution Table report is a table showing the individual
distribution performance of each of your products. This information can be used to
analyze the distribution coverage of each of your products individually. An example
of the report is shown in the figure below.
Figure 51: Product Channel Distribution Table Report
Each product is listed individually down the page and most of the fields should be
straightforward for you to understand. However we will discuss the last three rows
in more detail.
RETAILER MARGIN
This is the total amount of money that all of the stores in this channel stocking your
product earned last year. It is calculated by multiplying Retail Sales by the Retailer
Margin percentage above.
NO OF STORES STOCKING
This is the number of stores in this channel stocking this particular product. Unless
this is your best selling product then it is highly likely that this number is less than
the total number of stores in this channel stocking any of your products. See the
section on retail channels under the Product Pricing Screen section for more
information on what affects the number of stores stocking a particular product.
% CHANGE ON PREVIOUS YEAR

This is the percentage change in the number of stores stocking this particular
product in this particular retail channel. Generally you want this number to be
positive, unless perhaps you are trying to reduce distribution coverage for your
product to reduce costs.
Forecast Results
When you select the Forecast Results tree item you are given access to a series of
pro-forma firm level financial performance reports for next year based on your
current decisions and assuming that your sales forecasts are completely accurate:
Forecast Results Overview. A memo summarizing the reports available.

Forecast Marketing Expenditure Budget. This report is repeated from the Year
Ahead above and highlights what your remaining budget is for this year.
Forecast Net Marketing Contribution. Compares your forecast results for next
year versus your actual results for this year so that you can review how much
your current decisions are predicted to improve your net marketing
contribution.
Forecast Product Contribution. A detailed side-by-side comparison of all of your
individual products forecast results for the next year.
Current Decisions. Details of all of the decisions that you have entered for next
year.
The content of all of these reports has been explained in earlier sections so you
should be able to interpret them effectively unaided.
65
Index
Segmentation WebSim • 18
A
T
Advertising • 49
Testing My Decisions • 7
C
The m2g Consumer Market WebSim
Company Overview • 5 • 16
D The Year Ahead • 58
Three Levels of Planning • 11
Decision Screen Overview • 45
Distribution Overview • 22 W
Distribution Reports • 64 What Is music2go? • 3
E What Is Planning? • 8
Evaluation • 54
Evaluation Overview • 54
F
Firm Results • 59
Forecast Results • 65
I
Implementation • 45
Industry Overview • 55
Introduction and Overview • 3
Inventory Management • 52
M
Managing Your Firm • 6
Market Overview • 16
Market Research Reports • 61
Media Selection • 29
P
Planning • 8
Price • 48
Product Development • 45
Product lifecyle and Promotion • 27
Product Management Reports • 62
Product Segments and Promotion •
26
S
Sales Force Management • 51
Sales Promotion • 50
Sales Promotion Activities • 41

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Introduction and Overview 3

Empty Product Slot Screen................................................................... 47

Introduction and Overview

Net Marketing Contribution: Performance Measurement

Net marketing contribution is a measure of how profitable your firm is as a result of

 Increase Gross Margin without increasing your marketing expenditure

How you achieve that is the challenge of m2g.

 Product Development - whether to upgrade existing products and/or launch

Functional Manager approach each member of the team takes individual

Managing Your Firm

 Planning a marketing program,

This process is depicted in the figure below

Figure 3: The management process in marketing

OBJECTIVES AND GOALS

 Clear and specific.

 Quantitatively measurable when possible.

For example, for your m2g firm:

Weak (too general) Workable

Objective Possible Strategies

SUMMARY - KEY PLANNING QUESTIONS

Three Levels of Planning

Planning your m2g firm's marketing strategies should be conducted on three

Figure 4: Three levels organization planning

Strategic Company Planning

 Define the organizational mission.

The third step in strategic company planning, deciding on a set of objectives,

Strategic Marketing Planning

Strategic marketing planning is a five-step process:

 Conduct a situation analysis.

Each step is discussed below.

As part of a situation analysis, many organizations perform a SWOT assessment. In

You already know that strategic planning involves matching an organization's

POSITIONING AND DIFFERENTIAL ADVANTAGE

After the product is positioned, a viable differential advantage has to be identified.

TARGET MARKETS AND MARKET DEMAND

Each marketing-mix element contains numerous options. Further, decisions

Annual Marketing Planning

PURPOSES AND RESPONSIBILITIES

ANNUAL MARKETING PLANNING IN M2G

 Executive Summary. You should be able to write a short explanation of what

5% this year will support a strategic objective to increase sales by 25% in 5

The m2g Consumer Market

HOUSEHOLD AGE AND INCOME

Figure 5:Household Age and Income Data

From this information, you can see that:

 Youth household make up a very small percentage of the population so most

 Competitively priced ($30 - $60)

Figure 6:Youth Segment- purchase profile by household type

 High priced ($80-$120)

 Medium high emphasis on styling features. In order to be used in conjunction

Figure 7: Sports segment- purchase profile by household type

 Medium priced ($40-$80)

Figure 8: Standard segment- purchase profile by household type

Forecast Segment Demand

Figure 10: m2g Multi-Player Forecast Demand 2008-2018

Table 1:Retail Purchases by Segment Type

Note: "Consumer' is defined here as the individual conducting the purchase

Consumer Electronics Stores

Table 2: CE Store Categories by Marketing Mix

SPORTS SEGMENT (ONLY AVAILABLE IN MULTI-PLAYER)

 Buyers in the standard segment place less emphasis on styling and

 A broad, deep assortment of product lines

Increase Gross Margin without increasing your marketing expenditure

Product Development - whether to upgrade existing products and/or launch

Planning a marketing program,

Clear and specific.

Quantitatively measurable when possible.

Define the organizational mission.

Conduct a situation analysis.

Executive Summary. You should be able to write a short explanation of what

Youth household make up a very small percentage of the population so most

Competitively priced ($30 - $60)

High priced ($80-$120)

Medium high emphasis on styling features. In order to be used in conjunction

Medium priced ($40-$80)

Buyers in the standard segment place less emphasis on styling and

A broad, deep assortment of product lines

Shallow product range is incompatible with end-user emphasis on styling (see

Younger age groupings have a higher tendency to make purchases on impulse.

The steps of the identification and evaluation of alternatives is longer than

Contemporary Hits Radio (CHR)

Keep the current design